Should You Buy STERIS (STE) after Synergy Health Merger?
On Dec 7, 2015, we issued an updated research report on Ohio-based Steris Plc STE, that develops infection prevention, decontamination, microbial reduction, and surgical and gastrointestinal support products and services.
STERIS ended the second quarter of fiscal 2016 on a mixed note. While the bottom line comfortably exceeded the Zacks Consensus Estimate, the top line failed to meet the same. However, the company’s segmental performance was impressive, with growth witnessed across all three segments.
In Nov 2015, STERIS finally closed its mega $1.9 billion deal to buy U.K.-based outsourced sterilization services provider Synergy Health plc. Management considers this deal a significant milestone, as it combines STERIS' Infection Prevention and Services businesses with Synergy's Hospital Sterilization Services. Subsequent to the deal’s close, a new global leader has emerged in infection prevention and sterilization.
Further, the company's performance in its largest segment, Healthcare, continues to impress. Across the entire Healthcare business, STERIS witnessed consistent solid growth, particularly in the U.S.
Moreover, the segment’s operations were favorably impacted by increased volumes and favorable foreign exchange rates. Healthcare backlog also increased 16% at the end of the quarter, driven by the company’s strong performance in the U.S. market. Further, the company possesses a robust cash balance position.
On the flip side, a number of STERIS’ customers are undergoing consolidation, the rate of which, if not checked, will adversely affect STERIS’ business performance and financial condition, going forward. Also, competitive headwinds and failure to gain substantially from cost reduction initiatives continue to weigh on the stock’s performance.
Currently, STERIS sports a Zacks Rank #1 (Strong Buy).
Key Picks in the Sector
Some other medical instrument stocks worth considering are Masimo Corporation MASI, Natus Medical Inc. BABY and Olympus Corporation OCPNY. All the three stocks carry the same Zacks Rank as STERIS.
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MASIMO CORP (MASI): Free Stock Analysis Report
NATUS MEDICAL (BABY): Free Stock Analysis Report
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STERIS PLC (STE): Free Stock Analysis Report
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